Qualcomm Anti-Trust Trial Starts

According to the latest news report by Bloomberg, the trial against Qualcomm Inc. by the US Federal Trade Commission (FTC) started on Friday. The charges levied against Qualcomm are that the chip maker has hurt competition for smartphone components.

This non-jury trial started on Friday, January 04 and is scheduled to run in San Jose, California, before the US District Judge Lucy Koh till January 28.

Ironically, the two main witnesses on the first day of the trial that have been put forward by the FTC are Chinese companies – Huawei Technologies Co. and Lenovo Group Ltd.

The fact that the two main witnesses in this case are Chinese companies comes as no surprise. China is the largest smartphone manufacturer in the world and also most of the world’s major smartphone manufacturing companies have based their operations in this country.

However, the fact that Chinese companies are not testifying against Qualcomm shows how much the situation has changed since the FTC first filed a lawsuit against Qualcomm in January of 2017.

On the first day of the trial, both Huawei as well as Lenovo gave their testimonies that Qualcomm had threatened to stop supplying the two companies with chips if they did not continue to pay the technology licensing fees that the chip maker demanded.

According to Huawei’s testimony, in 2013, while negotiating over new chip-sets, Qualcomm was alleged to have informed the Chinese smartphone maker that if the CDMA (code division multiple access) licensing agreement was not extended, then the company would stop supplying chips to them.

Huawei’s General Counsel Nanfen Yu made these statements via a video deposition that was played before the court. The General Counsel also stated that everyone in the industry was aware of how Qualcomm operated. Yu stated that the chip maker made it clear that Huawei needed to sign some form of a licensing agreement before it was willing to supply the company with chips for their smartphones. He said that the chip maker left them with no choice in the matter.

The reason why Huawei being a star witness at this trial is ironic is because the Chinese smartphone maker is also at the center of another legal battle with the US government, where the Chinese company is the accused. Huawei, the second largest smartphone maker in the world and also one of the largest manufacturers of networking hardware, has been accused of stealing American tech for China.

Qualcomm’s argument against the testimonies presented by the Chinese companies is that neither company ever faced a disruption of supply, despite the fact that the agreement for upgrading mobile network components from 3G to 4G had reached an end during those negotiations.

The central point of dispute in this case is the licensing revenue that the chip maker gets from the patents it claims underlie all modern-day phone systems. This is also the cause for a world-wide legal dispute between Qualcomm and Apple Inc; Apple has also accused the chip maker of unfair practices.

Lenovo’s Vice President of Intellectual Property Ira Blumberg, in his video deposition, stated that in the past, Qualcomm had retaliated against customers who had tried to challenge its terms and conditions by either delaying or entirely cutting off the supply of microchips to the companies.

Blumberg stated that they did not know whether Qualcomm would take such steps with Lenovo, but they could not take that risk.

Qualcomm had tried to discredit the expert for the FTC, Michael Lasinski, by stating that he had represented Huawei in prior licensing disputes and intellectual property disputes, and that he had even testified for the Chinese smartphone maker on three separate occasions.

Luis Aureliano is a business writer and financial analyst. With over 15 years of experience in global finance and an MBA in economics and management, Luis’s areas of expertise include business, marketing, communications, personal finance, macro economics, stocks and emerging markets.

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